Adelaide property market to emerge strong from COVID-19 shutdown: HotSpotting's Terry Ryder

Adelaide property market to emerge strong from COVID-19 shutdown: HotSpotting's Terry Ryder
Adelaide property market to emerge strong from COVID-19 shutdown: HotSpotting's Terry Ryder

EXPERT OBSERVATION

The key question for Hotspotting in putting together our reports in the current climate is this: among the locations that have strong long-term fundamentals supporting price growth, which ones are best set-up to withstand the forces of the Covid-19 shutdown?

We’re searching for places which have the credentials to do well in the short-term, in dealing with the impacts of virus crisis, as well as having the features that drive long-term growth.

As I see it, the key factors are:

1. The strength of the market pre-coronavirus

2. The level of vacancies going into the virus shutdown period

3. The make-up of the local economy and in particular where most of the jobs exist

4. The key components of population growth in that location

5. The level of spending on infrastructure

All of those elements are important, but perhaps the most important one in the short-term is the make-up of the local economy and which sectors provide the bulk of the jobs.

Let me give you an example: Albury-Wodonga, which straddles the border between NSW and Victoria, has one of strongest economies anywhere in regional Australia, it offers wonderful affordability and high rental yields – and, in the past 12 months, there’s been some pretty good price growth there.

But the key factor about Albury-Wodonga right now is where most of its employment exists.

The four biggest sectors that provide the most jobs in this city are: 1 hospitals and medical services; 2 supermarkets and food stores; 3 the military; and 4 aged care.

I can’t imagine a better situation in terms of sectors likely to be hiring rather than firing in the current climate than those.

So, right now, amid all the issues afflicting Australia because of the coronavirus, Albury-Wodonga is performing well in its economy and its property market.

Overall, what we know to be true is that regional Australia is much less impacted by the virus shutdown, generally speaking, than the major cities.

Clearly, regional cities where the economy is largely dependent on tourism will suffer. But most of the regional centres that interest us are not in that situation.

Most of the regional centres that are grabbing our attention have economies based on sectors that are doing well in the current situation, or are likely to do well as we exit the lockdown phase and head back towards normal - sectors like agriculture, viticulture and resources & energy.

Among the capital cities, Adelaide property market is particularly well placed to emerge from the shutdown with prospects for growth.

Coming into the virus crisis, Adelaide was one of the leading capital city markets in the nation with the best prospects for growth.

The Autumn 2020 edition of the Price Predictor Index ranked Adelaide No.1 among the state and territory capital cities for the number of suburbs with rising sales activity, out-ranking both Melbourne and Sydney.

Adelaide is one of the nation’s most consistent property markets. It always delivers steady demand, underpinned by a solid local economy and helped by the exceptional value for money offered by its housing market.

Adelaide also had a very low vacancy rate heading into the shutdown period: an overall vacancy rate below 1% which means the city’s rental market is well-placed to absorb the extra rental stock coming into the market because of the impact of the virus shutdown.

The latest figures, to the beginning of April, show that even with the recent influx of new properties seeking tenants, its vacancy rate is still just 1.2% (the lowest among the capitals, equal with Canberra).

The city’s economy is in a strong position to recover well from the shutdown period.

Adelaide is the high-tech innovation capital of Australia and South Australia leads the nation in the production of alternative energy. It has been transitioning strongly from old-style manufacturing to the production of modern technology products.

One of the likely outcomes from the virus crisis is a revival of manufacturing in Australia and Adelaide is well-placed to benefit from that.

Adelaide also has strong sectors in education and medical services.

It has a state government which has been spending significant amounts on infrastructure – and has announced plans to fast-track shovel-ready infrastructure projects to lead the economic recovery on the other side of the shutdown period.

Overall, I see Adelaide as being one of the best capital cities in the nation for real estate investment with good prospects for future growth, as well as above-average rental yields.

TERRY RYDER is the founder of hotspotting.com.au
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Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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